Fair Trade Commission to Re-pursue Full Revision of the Fair Trade Act Including Abolition of Exclusive Prosecution System and Data Submission Order System

[Sejong=Asia Economy Reporter Joo Sang-don] The Fair Trade Commission (FTC) is set to re-push the comprehensive amendment of the Fair Trade Act, which includes the abolition of the exclusive prosecution system and the introduction of a court order system for data submission.

The FTC announced on the 10th that it will open a 40-day legislative notice period until July 21 to discuss the 'Comprehensive Amendment to the Fair Trade Act,' which was automatically discarded due to the expiration of the 20th National Assembly's term at the end of May, for the 21st National Assembly.

This comprehensive amendment is identical to the one that was legislatively notified in August 2018 and submitted to the National Assembly in November of the same year. This is because only some procedural legal provisions, such as the partial amendment to the Monopoly Regulation and Fair Trade Act passed by the National Assembly in April this year, are excluded.

Kim Jae-shin, Secretary General of the FTC, explained, "Since the direction and reform nature at the time of preparing the comprehensive amendment are still valid, we are re-pushing the existing comprehensive amendment for discussion in the 21st National Assembly."

The comprehensive amendment includes ▲restructuring the enforcement system of the Fair Trade Act ▲improving the regulatory legal system for corporate groups ▲promoting innovative growth ▲and improving legal enforcement procedures.

First, to rationally organize criminal sanctions, the exclusive prosecution system will be abolished for hard-core cartels (price-fixing, supply restriction, market division, bid-rigging) under the Fair Trade Act, which are socially condemned, such as price-fixing and bid-rigging. Additionally, a court order system for data submission will be introduced to support proof of damages in damage compensation lawsuits related to collusion and unfair trade practices. To enhance the effectiveness of administrative enforcement, the upper limits of fines will be doubled as follows: ▲cartels from 10% to 20% ▲abuse of market dominance from 3% to 6% ▲unfair trade practices from 2% to 4%.

Currently, the ownership threshold for regulating private interests is unified to 20% from 30% for listed companies and 20% for unlisted companies, and subsidiaries owned over 50% by these owners will also be subject to regulation. Based on the designation criteria as of May 1 this year, 210 entities are currently regulated, but with an additional 381 entities, the total regulated entities will expand to 591. Furthermore, to strengthen the prevention of illicit expansion of control, the exercise of voting rights on shares held by public interest corporations in affiliated companies will be generally prohibited, except for listed affiliates where voting rights are allowed within a 15% combined limit of special related parties. Financial and insurance companies are excluded from voting rights allowances related to hostile mergers and acquisitions (M&A) defense and mergers between affiliates that may be abused for private interests. New regulations restricting voting rights on existing circular shareholdings of groups newly designated as mutual investment groups will also be introduced. The shareholding requirements for subsidiaries and sub-subsidiaries of new holding companies (including newly incorporated subsidiaries and sub-subsidiaries of existing holding companies) will be strengthened to 30% for listed companies and 50% for unlisted companies.

The amendment also includes provisions to build an innovation ecosystem in the Korean economy and strengthen the FTC's enforcement capabilities in new industry sectors. To activate investment and M&A in venture companies, the establishment requirements and behavioral restrictions for venture holding companies will be significantly relaxed. The requirements for subsidiary shareholding will be eased, and restrictions on acquiring shares of non-affiliated companies (within a 5% limit) will be abolished. The establishment requirements will be relaxed (asset size from 500 billion KRW to 30 billion KRW, etc.), and the grace period for subsidiaries' inclusion in large business groups will be extended from 7 to 10 years. Additionally, even if the sales (or total assets) of the acquired company fall below the current reporting threshold (30 billion KRW), a reporting obligation will be imposed if the transaction amount (acquisition price) is large.

To enhance transparency and reliability in the enforcement process, the right to legal counsel for businesses and business associations under FTC investigation and review will be codified, and the preparation of written statements for party testimonies will be made mandatory.

During the legislative notice period, the FTC plans to re-collect opinions from related ministries and stakeholders, undergo review by the Ministry of Government Legislation, and proceed through vice ministerial and Cabinet meetings before submitting the amendment to the National Assembly prior to the regular session in September.

This content was produced with the assistance of AI translation services.